Steel: Sailing in rough water - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Steel: Sailing in rough water

Jun 18, 2001

With a downturn in the global economy, the steel industry is facing tough times. Global steel consumption, which grew by 5.8% in FY01, is expected to grow 2.3% in the current year. As a result of the demand supply gap in the industry steel prices are on a downhill journey.United States, which accounts for around 15% of the world steel consumption, is expected to record a negative growth rate of 0.1% in the current year. Many companies in the US are facing a financial meltdown, which could further pressurize steel prices. After touching a low of US$ 180 per tonne in December, steel prices have bounced back to US$ 210 per tonne. However, the rally has now halted and the prices are unlikely to recover at least in the next six months, as there is an absence of growth in demand.

According to the World Steel Dynamics (WSD) production of steel is expected to fall by 2% to 829 m tonnes in the current year, as compared to a rise of 7% in the previous year. The decline in production could help steel producers in increasing product prices, particularly for value added steel products.

In the medium term, pressure on the industry could lead to acceleration in consolidation activity. Usinor of France and Luxembourg’s Arbed have already announced merger plans, as have NKK and Kawasaki, Japan’s second and third largest steel makers.

On the other hand, sustained demand from the infrastructure segment has resulted in an uptrend in domestic demand for steel. Finished steel production registered an impressive growth of 7.7% to 29.7 m tonnes in FY01. Consumption too rose by about 7%. Steel exports registered a growth of 9.5% despite a global downtrend. While SAIL’s production grew by 7.9%, Tisco’s production was up by 4.9%.

(Consumption in million metric tonnes)19992000Change 99-002001Change 00-01
China1311374.7%1477.3%
Japan69747.1%73-0.7%
Total Asia3113327.0%3464.0%
US1111153.8%115-0.1%
Australia & NZ76-6.0%6-4.8%
Africa15153.4%162.0%
Middle East15167.3%161.2%
World Total7117525.8%7692.3%
Source: IISI

Fiscal year 2001-02 has started on a dull note for the Indian steel sector. Production has fallen by 1.8% in April 2001. The future outlook is not encouraging as reflected from the sliding growth rates in industrial production. The index of industrial production (IIP) registered a growth of just 2.7% YoY in April ’01 compared to 6.5% recorded in April ’00. The manufacturing sector witnessed a decline in growth rates by 440 basis points to 2.7% in April. The numbers are indicative of the slowing Indian economy, affected by the sluggish world economy. The Indian steel producers could be hit over the next six months, as demand remains at lower levels. However, recovery could come with a rise in domestic construction activity.

Equitymaster requests your view! Post a comment on "Steel: Sailing in rough water". Click here!

  

More Views on News

TINPLATE 2020-21 Annual Report Analysis (Annual Result Update)

Nov 16, 2021 | Updated on Nov 16, 2021

Here's an analysis of the annual report of TINPLATE for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TINPLATE. Also includes updates on the valuation of TINPLATE.

SUNFLAG IRON & STEEL 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

Here's an analysis of the annual report of SUNFLAG IRON & STEEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of SUNFLAG IRON & STEEL. Also includes updates on the valuation of SUNFLAG IRON & STEEL.

A Peek into Tata Steel's Stellar June Quarter Performance (Views On News)

Aug 13, 2021

Tata Steel's June quarter profits were higher than the full-year profits reported for fiscal 2021.

Shyam Metalics IPO: Key Points to Consider (Views On News)

Jun 12, 2021

Shyam Metalics is commanding a strong grey market premium ahead of its IPO next week.

Tata Metaliks Share Price Jumps 8% After Turning Profitable (Views On News)

Jul 14, 2021

A peek into Tata Metaliks' stellar June quarter performance.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE METAL


Dec 9, 2021 (Close)

S&P BSE METAL 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS